If Obama’s Administration Takes Your 401K, Can We Call Him A Socialist Then?

A dear reader wrote yesterday that using the term “socialist” is a code word:

Martin Luther King Jr, W.E.B. Du Bois, Paul Robeson, A. Philip Randolph, etc were all denounced as “socialists”. Just as with Obama, the term is employed as a euphamism for something else entirely.

Righties have simply reached back in history to use an old code word for black. It set whites apart from those deemed unAmerican and those who could not be trusted during the communism scare. It’s funny, McCain wants to buy your house – and Obama’s the socialist.

Well, I don’t know about whether the aforementioned men were socialist or not. What I know is this: socialism is soothing ideology in troubled times and for people who are afraid about their survival. And socialism never turns out the way people hope or plan.

Long-time readers know that I have expressed worry about Americans generally and our leadership in particular when it comes to government handouts. It seems that far too many people are willing to enslave themselves (for that is exactly the relationship when one depends on the government for survival) in order to have a guarantee of economic safety. So today, we have businesses and individuals who because of irresponsible living, rely on the government long-term. The government is a harsh taskmaster. A nameless, faceless bureaucrat will decide a person’s fate.

Long-time readers also know of my unease about John McCain and my discomfort about the “bailout”. So, when I criticize Barack Obama, it’s a matter that I think he is more extreme than John McCain when it comes to big government and redistribution. That is to say, I have not liked the socialistic trend our government has taken. There seems to be an impulse, no matter the leader, to invade every aspect of American’s lives. The most invasive way to do that is to take a person’s money–their economic choices via taxation.

Obama is just more extreme in his desire for the government to control American’s money. He has more socialistic impulses than the other candidate. That is just one reason I oppose his candidacy. It’s a big reason.

House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created “guaranteed retirement accounts” for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, said that since “the savings rate isn’t going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should.”

by Sir John Hawkins

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1) McDermott is right when he says the savings rate isn’t going up. But the savings rate doesn’t include gains to money you invest in the stock market. It ignores the buildup of net worth. (If you bought a share of XYZ Corp. in January at $100, for instance, and its value doubled by December, the savings rate measure would still value that investment at $100. In short, the savings rate is a phony number.)

2) So based partly on the above faulty logic, the $4.5 trillion, as of the start of the year, invested in 401(k) plans doesn’t count as savings.

3) Ghilarducci would have workers abandon the stock market right at the bottom of the market. A stupid idea, according to Warren Buffett: “I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: ‘Put your mouth where your money was.’ Today my money and my mouth both say equities.”

4) Ghilarducci would offer a lousy 3 percent return. The long-run return of the stock market, adjusted for inflation, is more like 7 percent. Look at it this way: Ten thousand dollars growing at 3 percent a year for 40 years leaves you with roughly $22,000. But $10,000 growing at 7 percent a year for 40 years leaves you with $150,000. That is a high price to pay for what Ghilarducci describes as the removal of “a source of financial anxiety and…fruitless discussions with brokers and financial sales agents, who are also desperate for more fees and are often wrong about markets.” Please, I’ll take a bit of worry for an additional $128,000.

5) What effect would this plan have on an already battered stock market? Well, I would imagine it would send it even lower, sticking a shiv into the portfolios of everyone who didn’t jump aboard. But I am sure the Chinese would love to jump in and buy all our cheap stocks to fund the retirement of their citizens.

With the Democrats controlling Congress, having Barack Obama in the White House will mean there is no stop to any socialist impulses. For me, I like an adversarial relationship in Washington. Gridlock is a beautiful thing. That means that no laws can be made. Good.

Everything the government touches turns to dung. Democrats unfettered frightens me. They believe in big government generally. They believe in government as a solution to all problems.

Since I believe that the government is not a force for good and never will be, I am not voting for a guy who believes that the problem isn’t big government, it’s just that big government isn’t done right. That, to me, is rank hubris.

Democrats can save their charges of racism. It’s offensive and to quote their Dear Leader, a distraction. The problem with Barack Obama is not his skin color. In fact, I eagerly anticipate the day when I can vote for a black man for president. But not this man. My opposition is based in ideology. It is philosophy. It is policy. And because I disagree with Barack Obama on nearly everything, I’m not voting for him.